Just as a family business owners need to pass on the business to the next generation, the time has come to transition this space in the Sunday newspaper to other topics. It has been an honor and pleasure to interact with all the family businesses over the years that commented and responded to my articles. My hope is that the information has been useful in maintaining your family harmony, boosting the business performance, and laying the groundwork for a family business that will last for generations.
A wide range of family business issues and challenges has been addressed over the past few years. For my final article, I have decided to create a list for you of what I consider to be the top family business issues, solutions and pointers. I encourage you to cut it out and stick it to your fridge or post it on your wall. Maybe one day it will come in handy.
• Family business success rate is less than 35 percent – spend time working on the family business.
• The biggest family business issues are succession, communication and governance.
• Why are family businesses so challenging? Family is about unconditional love, and business is about profit. These two goals do not always align.
• Top succession concerns: treating all kids fairly, non-family employees, family cohesion and estate planning.
• Most surprising and difficult succession issue: getting the current generation to make space for the next generation. The next generation should be mentored, preferably not by the parent.
• The approach with the highest correlation to a successful succession is having the next generation spend some time working outside the family business. The next best is working for someone other than the owner.
• Most important action family business can take: installing appropriate governance. That means having a board of advisers with some members who are not family or friends. Pay should be based on position and contribution.
• Bringing in a non-family leader sometimes is the right answer. There is a difference between being a good owner and a good manager.
• Good communication is the key to a healthy family business and mitigating conflict. Regular family meetings are essential for good communication.
• Top conflict resolution tool: Actively listen by convincing the speaker you heard what they said.
• Siblings work together longer than child and parent. Their success depends on three things: defining roles and responsibilities; having open, honest and frequent communication; and defining the money, benefits and separation parameters.
• Strive to professionalize the business. Ask yourself, “What would we do if this were not a family business?”
• Fight hard to prevent entitlement in and the wealth effect on the next generation.
• Family businesses are made up of family, business and ownership – be aware that a change in any of these will affect the others. Think of divorce or selling equity.
• Family members who do not work in the business can have a major impact on the future of the company. Don’t ignore them.
• Strong financial controls and transparency are vital.
• Gender is irrelevant when it comes to successfully managing the business, regardless of industry.
• Seek out good advice for problems that are not in your area of expertise.
My advice has relied on what I have seen with my family business, Olan Mills; the many family businesses I have worked with; and on my relationships with legal, financial, insurance, business and psychological professionals. You know who you are, and I thank you.
Henry Hutcheson is a nationally recognized family business speaker, author and consultant in Raleigh. He can be reached at Familybusinesscarolina.com.